George Osborne delivered his first Budget as Chancellor this afternoon, saying: "This emergency budget pays for the past, and plans for the future".Speaking to a packed House of Commons, Mr Osborne painted a grim economic picture, saying:"

The coalition government has inherited from its predecessor the largest budget deficit of any couuntry in Europe, with the exception of Ireland". He laid the blame for the state of the public finances squarely at his predecessors' door, and pledged that he would "not hide hard choices from the British people".Mr Osborne's Budget set out a range of measures aimed at eradicating Britain's structural deficit by 2015, comprising a 77% / 23% balance between public spending cuts and tax rises. Among the latter there were slight increases in National Insurance, a politically controversial rise in Capital Gains Tax for all higher rate tax payers, and a new banking levy agreed with Germany and France. VAT, which had been widely tipped to rise, will go up to an "unavoidable" 20% from the start of next year.

The Chancellor also announced a welter of plans to reduce public spending. He said that he would cut Britain's "burgeoning welfare costs" by reducing tax credit payments to those on higher incomes, restricting the Sure Start maternity grant, tightening the requirements for access to Disability Living Allowance and freezing child benefits for the next three years. On housing benefits, Mr Osborne announced a raft of measures - including a maximum limit on benefits - aimed at reducing costs by £1.8bn per year by 2015.Additional moves to cut spending included a pledge to freeze public sector salaries for two years, apart from the lowest paid who will receive a very small rise in each year. Describing public sector pensions as "one of the greatest long term pressures facing our public finances", the Chancellor has also commissioned a review on pensions from former Labour Work and Pensions Secretary John Hutton.Building on the £6bn of cuts announced in the last few weeks, Mr Osborne swung his axe at a number of other spending areas - a significant additional £30bn in cuts per year until 2015. These break out at an average of 25% per department per year, beyond the ringfenced areas of health and international aid.

Mr Osborne announced that the Spending Review, which will set out specific departmental budgets, will report on Wednesday 20 October. In order to mitigate against the effects of some of the more painful cuts, the Chancellor announced that the threshold for payment of income tax would be raised by £1,000 to £7,475 - a compromise on the Lib Dem's flagship policy of increasing the baseline to £10,000. In addition, council tax will be frozen for one year from next April. Many involved in local politics are already concerned that this places an even greater burden on local authorities at a time when their central government funding is being squeezed. Businesses, though, should be pleased with a cut in the headline rate of corporation tax by 1% per year for each of the next four years, a reduction in the small business rate to 20%, as well as the pledge to meet existing commitments to all capital spending projects.

The Chancellor also announced a Regional Growth Fund and new regional tax regimes to rebalance the economy away from London and the South East. Other - limited - goodies included a restoration of the earnings link to the basic state pension, a guaranteed minimum annual pension rise, and an increase of the child element of the child tax credit by £150 per year above inflation.Responding to the Budget, Labour acting leader Harriet Harman said: "The Chancellor has delivered his first budget but we've seen it all before...it's his first budget but it's the same old Tories." It is believed that the Budget was finalised as early as Friday afternoon, an unprecedented achievement if true. Sorting out the average 25% cut across departmental budgets ahead of October's spending review may be a little more of a challenge.